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A Framework for Studying Customer Behaviour in the Context of Developing Customer Retention Strategies in Telecom Industry of Bihar (India)

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A Framework for Studying Customer Behaviour in the Context of Developing Customer Retention Strategies in Telecom Industry of Bihar (India) American Research Journal of Business and Management Original Article ISSN 2379-1047 Volume 1, Issue 3, 2015 A Framework for Studying Customer Behaviour in the Context of Developing Customer Retention Strategies in Telecom Industry of Bihar (India) Abhishek Singh1, Dipankar Dey2, Sukanta Chandra Swain 3 Abstract: When the number of subscribers in telecom sector in India has reached its saturation point, creating and acquiring new customers is not only difficult but also costly in terms of marketing parlance. Hence, the best core marketing strategy for the future is to endeavor to retain existing customers. The competition is fierce and subscribers limited, hence, the need to safeguard existing invaluable customer base. Sustainability of today’s Telecom business is majorly dependent on way the service provider handles and ring-fences its customers. Knowing your customer is at the core of the business. Thus developing customer retention strategies has been turned to be the need of hour. However, amidst cut-throat competition and saturating customer base, developing strategies to retain customers is undoubtedly a tough task. Considering the urge, we have tried to devise a framework for studying customer behavior in Indian telecom sector, particularly in the telecom zone of Bihar state, for the sake of developing customer retention strategies. The framework will facilitate research for understanding its customers and the factors in and around the customer which will trigger a specific action from him/her. It does not stop in only seeing the customer from the product and service proposition from the operator side but also understanding factors beyond like Age, Sex, Economic condition, geography, education etc. Keywords: Framework, Customer Behaviour, Retention, Strategies, Telecom Sector, Bihar I. INTRODUCTION What we buy, how we buy, where and when we buy, in how much quantity we buy depends on our perception, self concept, social and cultural background and our age and family cycle, our attitudes, beliefs values, motivation, personality, socialclass and many other factors that are both internal and external to us. While buying, we also consider whether to buy or not to buy and, from which source or seller to buy. In some societies there is a lot of affluence and, these societies can afford to buy in greater quantities and at shorter intervals. In poor societies, the consumer can barely meet his barest needs. Management is the youngest of sciences and oldest of arts and consumer behaviour in management is a very young discipline. Various scholars and academicians concentrated on it at a much later stage. It was during the 1950s, that marketing concept developed, and thus the need to study the behaviour of consumers was recognised. Marketing starts with the needs of the customer and ends with his satisfaction and continued association. When everything revolves round the customer, then the study of consumer behaviour becomes a necessity. It starts with the buying of goods. Goods can be bought individually, or in groups. Goods can be bought under stress (to satisfy an immediate need), for comfort and luxury in small quantities or in bulk. Indian Telecom sector has witnessed rapid growth over the last decade and is now entering the phase wherein the growth is plateauing. New subscriber additions month on month is on a declining trend (0.7%) and with the Teledensity at 72.18 (Urban 139.42 and Rural 42.43), the search for new subscribers is becoming difficult day by day.Profitability and sustained growth of a Telecom firm is possible only if it can successfully ring-fence its valuable customers.Retention of existing subscriber base is hence taking the center stage. At the core of the business is the Customer who is being influenced by a number of factors in and around him. There are factors which make a subscriber stick to a particular service provider and there are factors which triggers switch.These factors stretch much beyond the usual factors like Product, service, experience etc. and also include personal, Cultural, socio-economic, Psychological demographic factors. To be successful a service provider has to understand all those factors that influence a specific behavior of a customer: Know your Customer. 1 Research Scholar, ICFAI University Jharkhand, Ranchi, India, Email: [email protected] 2Dean, IBS Business School, Kolkata, Email: [email protected] 3Asst. Dean, ICFAI University Jharkhand, Ranchi, India, Email: [email protected] www.arjonline.org 32 American Research Journal of Business and Management, Volume 1, Issue 3, 2015 ISSN 2379-1047 II. OBJECTIVE/S AND SCOPE The Primary objectives of this research venture are; • To identify the major variables influencing a customer to switch service providers or stick to a particular service provider. • To rank the variables so identified in order of priority by assigning weightages to these variables. • To devise formulae / Index to generate a score for each customer while coming on board (This score will predict the chances of customers moving out of the system). • To devise appropriate retention strategy for ring-fencing. III. REVIEW OF LITERATURE Consumer decision making has long been of interest to researchers. Beginning about 300 years ago early economists, led by Nicholas Bernoulli, John von Neumann and Oskar Morgenstern, started to examine the basis of consumer decision making (Richarme 2007). This early work approached the topic from an economic perspective, and focused solely on the act of purchase (Loudon & DellaBitta 1993). The most prevalent model from this perspective is ‘Utility Theory’ which proposes that consumers make choices based on the expected outcomes of their decisions. Consumers are viewed as rational decision makers who are only concerned with self-interest (Schiffman&Kanuk 2007, Zinkhan 1992). Gupta. S, Lehmann. D R. and Stuart. J A, (2004) in their research paper ‘Valuing Customers’ focus on the most critical aspect of a firm: its customers. Specifically, they demonstrate how valuing customers makes it feasible to value firms, including high-growth firms with negative earnings. The authors define the value of a customer as the expected sum of discounted future earnings. They find that a 1% improvement in retention, margin, or acquisition cost improves firm value by 5%, 1%, and .1%, respectively. They demonstrate their valuation method by using publicly available data for five firms; One traditional firm (Capital One) and four Internet companies (Amazon.com, Ameritrade, eBay, and E*Trade). They found that Retention elasticity is in the range of 3 to 7 (i.e., a 1% improvement in retention increases customer value by 3%-7%). Retention rate has a significantly larger impact on customer and firm value than does the discount rate or cost of capital. It is inferred that customer lifetime value is receiving increasing attention in marketing, especially in database marketing. In this article, attempt has been made to show that the concept not only is important for tactical decisions but also can provide a useful metric to assess the overall value of a firm. The underlying premise of the model is that customers are important intangible assets of a firm, and their values should be measured and managed like any other asset. The study has been limited to a very small sample size of 5 Firms. It is difficult to quantify the value of Retention in such straight terms basis a small sample study. Gustafsson. A, Johnson. M D, and Roos. I, (2005) in their research paper titled ‘The Effects of Customer Satisfaction, Relationship Commitment dimensions, and Triggers on Customer Retention’ examine the effects of customer satisfaction, affective commitment, and calculative commitment on retention. The study further examines the potential for situational and reactional trigger conditions to moderate the satisfaction -retention relationship. The results support consistent effects of customer satisfaction, calculative commitment, and prior churn on retention. Prior churn also moderates the satisfaction -retention relationship. The results have implications for both customer relationship managers and researchers who use satisfaction surveys to predict behavior. The researchers found that customer satisfaction has a consistent negative effect on churn (a positive effect on retention). In contrast, affective commitment does not predict churn when it is included with customer satisfaction. Other findings involve the effects of prior churn on future churn. Rather than rely solely on psychometric constructs to explain churn, the finding included prior churn as a state dependent variable to explain subsequent churn. It is concluded by the researchers that effective CRM strategies vary considerably depending on which factors are driving retention. If customer satisfaction is the primary driver of retention, a firm should improve product or service quality or offer better prices. If affective or calculative commitment is more important, a firm should either build more direct relationships with customers or build switching barriers in relation to competitor. A limitation of the study is that it explores only nine months of retention. Another possible limitation is that customers self-selected into the various trigger conditions using the company's own survey. However, study identified the trigger categories using qualitative inter- views from a separate sample of the company's customers. More in-depth interviews with the customers who actually responded to the survey would help ensure
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